5 Discretionary Stocks To Buy As Consumer Confidence Hits 9-Month High

U.S. consumers are much more confident now than they were last month. A jumbo rate cut announced last month by the Federal Reserve, coupled with optimism surrounding more interest rate cuts in the coming months, have made consumers confident about the economy’s health.

Given the positive sentiment, it would be ideal to invest in discretionary stocks such as American Outdoor Brands, Inc. AOUT, Crocs, Inc. CROX, Norwegian Cruise Line Holdings Ltd. NCLH, Netflix, Inc. NFLX and Mattel, Inc. MAT. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

Contents hide

1 Consumer Confidence Soars

2 More Rate Cut Hopes Boost Consumer Confidence

3 4 Discretionary Stocks With Upside

4 American Outdoor Brands

5 Crocs, Inc.

6 Norwegian Cruise Line Holdings Ltd.

7 Netflix, Inc.

8 Mattel, Inc.

9 Zacks Names #1 Semiconductor Stock

Consumer Confidence Soars

The Conference Board said on Tuesday that the consumer confidence index surged to 108.7 in October, from 99.2 in the previous month, to hit its highest level in nine months.

The Present Situation Index, a measure of consumers’ assessment of current business and labor market conditions, jumped 14.2 points to reach 138. The Expectations Index, a measure of consumers’ short-term outlook for income, business, and labor market situation, rose 6.3 points to 89.1. This was comfortably above the threshold of 80. Any reading below 80 indicates impending recession.

The jump in consumer confidence comes after ebbing drastically in September on fears of a slowing economy. Interestingly, consumer confidence remained high in October despite data suggesting a cooling job market.

The Labor Department said on Tuesday that job openings fell to a three-and-a-half-year low in September. Despite the decline, the Conference Board’s survey showed that consumers’ perceptions of the jobs market improved in October, which boosted their confidence.

More Rate Cut Hopes Boost Consumer Confidence

Fears gripped markets earlier this month after fresh data showed a slight uptick in monthly inflation in September. This raised concerns over the economy’s health, turning markets volatile.

However, consumers are hoping that inflation will still be on track to reach the Federal Reserve’s 2% target. The Fed cut interest rates by 50 basis points in September, its first rate cut since March 2020.

The Federal Reserve has also hinted that more rate cuts are on the horizon if inflation continues to ease substantially. The CME FedWatch tool presently shows a 98.9% possibility of a 25-basis point cut in November and a 76.6% probability of a 20-basis point cut in December. Lower borrowing rates typically benefit growth stocks like tech and consumer discretionary.

4 Discretionary Stocks With Upside

American Outdoor Brands

American Outdoor Brands, Inc. is a provider of outdoor products and accessories, including hunting, fishing, camping, shooting and personal security and defense products, for rugged outdoor enthusiasts. AOUT produces products under the brands Caldwell; Crimson Trace; Wheeler; Tipton; Frankford Arsenal; Lockdown; BOG; Hooyman; Smith & Wesson Accessories; M&P Accessories; Thompson/Center Arms Accessories; Performance Center Accessories; Schrade; Old Timer; Uncle Henry; Imperial; BUBBA; UST; LaserLyte; and MEAT!.

American Outdoor Brands’ expected earnings growth rate for the current year is 59.4%. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the past 60 days. AOUT currently sports a Zacks Rank #1.